Dagum distribution

{{Probability distribution |

name =Dagum Distribution|

type =density|

pdf_image =File:DagumPDF.png|

cdf_image =File:DagumCDF.png|

parameters = $p>0$ shape
$a>0$ shape
$b > 0$ scale|

support = $x>0$ |

pdf = $\frac{a p}{x} \left( \frac{(\tfrac{x}{b})^{a p}}{\left((\tfrac{x}{b})^a + 1 \right)^{p+1}} \right)$ |

cdf = ${\left( 1+{\left(\frac{x}{b}\right)}^{-a} \right)}^{-p}$ |

quantile = $b(u^{-1/p}-1)^{-1/a}$ |

mean = $\begin{cases}
b\frac{\Gamma\left(1-\tfrac{1}{a}\right)\Gamma\left(p+\tfrac{1}{a}\right)}{\Gamma(p)} & \text{if}\ a>1 \\
\text{Indeterminate} & \text{otherwise}\ \end{cases}$

{{cite journal |last1=Chotikapanich |first1=Duangkamon |first2=William E. |last2=Griffiths |first3=Gholamreza | last3=Hajargasht | first4=Wasana | last4=Karunarathne |first5=D. S. Prasada |last5=Rao |display-authors=1 |year=2018 |title=Using the GB2 Income Distribution |journal=Econometrics | doi=10.3390/econometrics6020021 | volume=6 | number=2 |page=21 |doi-access=free |hdl=10419/195459 |hdl-access=free }} |

median = $b{\left(-1+2^{\tfrac{1}{p}}\right)}^{-\tfrac{1}{a}}$ |

mode = $b{\left( \frac{ap-1}{a+1} \right)}^{\tfrac{1}{a}}$ |

variance = $\begin{cases}
{b^2} \left(\frac{\Gamma\left(1-\tfrac{2}{a}\right) \, \Gamma\left(p + \tfrac{2}{a} \right)}{\Gamma\left(p\right)} - \left( \frac{\Gamma\left(1 -\tfrac{1}{a}\right) \Gamma\left(p + \tfrac{1}{a}\right)}{\Gamma\left(p\right)} \right)^2\right) & \text{if}\ a>2 \\
\text{Indeterminate} & \text{otherwise}\ \end{cases}$ |

skewness =|

kurtosis =|

entropy =|

mgf =|

char =|

}}

The Dagum distribution (or Mielke Beta-Kappa distribution) is a continuous probability distribution defined over positive real numbers. It is named after Camilo Dagum, who proposed it in a series of papers in the 1970s.{{cite journal |last=Dagum |first=Camilo |year=1975 |title=A model of income distribution and the conditions of existence of moments of finite order |journal=Bulletin of the International Statistical Institute |volume=46 |issue=Proceedings of the 40th Session of the ISI, Contributed Paper |pages=199–205 }}{{cite journal |last=Dagum |first=Camilo |year=1977 |title=A new model of personal income distribution: Specification and estimation |journal=Économie Appliquée |volume=30 |issue= |pages=413–437 }} The Dagum distribution arose from several variants of a new model on the size distribution of personal income and is mostly associated with the study of income distribution. There is both a three-parameter specification (Type I) and a four-parameter specification (Type II) of the Dagum distribution; a summary of the genesis of this distribution can be found in "A Guide to the Dagum Distributions".{{cite book |last=Kleiber |first=Christian |year=2008 |chapter=A Guide to the Dagum Distributions |editor-last=Chotikapanich |editor-first=Duangkamon |title=Modeling Income Distributions and Lorenz Curves |series=Economic Studies in Inequality, Social Exclusion and Well-Being |publisher=Springer |pages=97–117 |doi=10.1007/978-0-387-72796-7_6 |isbn=978-0-387-72756-1 |chapter-url=https://edoc.unibas.ch/61230/1/20180305141821_5a9d439d76be5.pdf }} A general source on statistical size distributions often cited in work using the Dagum distribution is Statistical Size Distributions in Economics and Actuarial Sciences.{{cite book |last1=Kleiber |first1=Christian |first2=Samuel |last2=Kotz |year=2003 |title=Statistical Size Distributions in Economics and Actuarial Sciences |publisher=Wiley |isbn=0-471-15064-9 }}

Definition

The cumulative distribution function of the Dagum distribution (Type I) is given by

: $F(x;a,b,p)= \left( 1+\left(\frac{x}{b}\right)^{-a} \right)^{-p} \text{ for } x > 0 \text{ where } a, b, p > 0 .$

The corresponding probability density function is given by

: $f(x;a,b,p)= \frac{ap}{x} \left( \frac{(\tfrac{x}{b})^{a p}}{\left((\tfrac{x}{b})^a + 1 \right)^{p+1}} \right) .$

The quantile function is given by

: $Q(u;a,b,p)= b(u^{-1/p}-1)^{-1/a}=\frac{bu^{\frac{1}{pa}}}{\left(1-u^{\frac{1}{p}}\right)^\frac{1}{a}}$

The Dagum distribution can be derived as a special case of the generalized Beta II (GB2) distribution (a generalization of the Beta prime distribution):

: $X \sim D(a,b,p) \iff X \sim GB2(a,b,p, 1)$

There is also an intimate relationship between the Dagum and Singh–Maddala / Burr distribution.

: $X \sim D(a,b,p) \iff \frac{1}{X} \sim SM(a,\tfrac{1}{b},p)$

The cumulative distribution function of the Dagum (Type II) distribution adds a point mass at the origin and then follows a Dagum (Type I) distribution over the rest of the support (i.e. over the positive halfline)

: $F(x;a,b,p,\delta)= \delta + (1-\delta) \left( 1+\left(\frac{x}{b}\right)^{-a} \right)^{-p}.$

The quantile function of the Dagum (Type II) distribution is

: $Q(u;a,b,p,\delta)= b \left[\left(\frac{u-\delta}{1-\delta}\right)^{-\frac{1}{p}}-1\right]^{-\frac{1}{a}}.$

Use in economics

The Dagum distribution is often used to model income and wealth distribution. The relation between the Dagum Type I and the Gini coefficient is summarized in the formula below:{{cite journal |last=Kleiber |first=Christian |year=2007 |title=A Guide to the Dagum Distributions |journal=Working Paper }}

: $G=\frac{\Gamma (p) \Gamma (2p+1/a)}{\Gamma (2p) \Gamma (p+1/a)}-1 ,$

where $\Gamma(\cdot)$ is the gamma function. Note that this value is independent from the scale-parameter, $b$ .{{Collapse top|title=Derivation of the Gini coefficient for the Dagum distribution}}

The Gini coefficient for a continuous probability distribution takes the form:

: $G = {1\over{\mu}}\int_{0}^{\infty}F(1-F)dx$

where $F$ is the CDF of the distribution and $\mu$ is the expected value. For the Dagum distribution, assuming $a > 1$ , the formula for the Gini coefficient becomes:

: $G = \frac{\Gamma(p)}{b \Gamma(1-1/a)\Gamma(p+1/a)} \int_{0}^{\infty} \left[ 1 + \left( \frac{x}{b} \right)^{-a} \right]^{-p} \left\{ 1 - \left[ 1 + \left( \frac{x}{b} \right)^{-a} \right]^{-p} \right\} dx$

Defining the substitution $u = (x/b)^{-a}$ leads to the simpler equation:

: $G = \frac{\Gamma(p)}{a \Gamma(1-1/a)\Gamma(p+1/a)} \int_{0}^{\infty} u^{-1/a-1}\left( 1 + u \right)^{-p} \left[ 1 - \left( 1 + u \right)^{-p} \right] du$

And making the substitution $z = u/(1+u)$ further changes the Gini coefficient formula to:

: $G = \frac{\Gamma(p)}{a \Gamma(1-1/a)\Gamma(p+1/a)} \int_{0}^{1} z^{-1/a-1}\left( 1 - z \right)^{p + 1/a - 1} \left[ 1 - \left( 1 - z \right)^{p} \right] dz$

Each of the integral components is equivalent to the standard beta function, which may be written in terms of the gamma function:

: $\text{B}(x,y) = {\Gamma(x)\Gamma(y)\over{\Gamma(x+y)}}$

Then using this definition, and the fact that $a\Gamma(1-1/a) = -\Gamma(-1/a)$ , the Gini coefficient may be written as:

: $\begin{aligned}
G &= \frac{\Gamma(p)}{ \Gamma(-1/a)\Gamma(p+1/a)} \left[ \frac{\Gamma(-1/a)\Gamma(2p+1/a)}{\Gamma(2p)} - \frac{\Gamma(-1/a)\Gamma(p+1/a)}{\Gamma(p)} \right] \\
&= \frac{\Gamma(p)\Gamma(2p+1/a)}{\Gamma(2p)\Gamma(p+1/a)} - 1
\end{aligned}$

with the last term being the Gini coefficient for the Dagum distribution.

{{Collapse bottom}}Although the Dagum distribution is not the only three-parameter distribution used to model income distribution, one study found it to usually be a better fit than other three-parameter models.{{cite journal |last1=Bandourian |first1=Ripsy |first2=James |last2=McDonald |first3=Robert S. |last3=Turley |display-authors=1 |year=2002 |title=A Comparison of Parametric Models of Income Distribution Across Countries and Over Time |journal=Luxembourg Income Study Working Paper No. 305 |ssrn=324900 }}

The Dagum distribution has been extended to model net wealth distribution, accounting for the observed frequencies of negative and null net wealth. This generalized model, known as the Dagum General Model of Net Wealth Distribution,{{Cite journal |last=Dagum |first=Camilo |date=2006 |title=Wealth distribution models: analysys and applications |url=https://rivista-statistica.unibo.it/article/view/1243 |journal=Statistica |language=en |volume=66 |issue=3 |pages=235–268 |doi=10.6092/issn.1973-2201/1243 |issn=1973-2201}} is a mixture model consisting of an atomic distribution at zero (representing economic units with no wealth) with two continuous distributions for negative and positive net wealth.

References

External links

[http://aix1.uottawa.ca/~gxgcb/Dagum_engl.htm Camilo Dagum (1925 - 2005)] {{Webarchive|url=https://web.archive.org/web/20170815224932/http://aix1.uottawa.ca/~gxgcb/Dagum_engl.htm |date=2017-08-15 }} : obituary

Category:Continuous distributions

Category:Income inequality metrics

Category:Economic inequality